Last Updated: March 20, 2018
Some widowed wives find themselves having to handle finances and other aspects of planning that their husbands managed when they were alive. This is why it’s important for families to have a financial plan in place, so that the transfer of finances and trusts goes smoothly when the financial decision-maker passes.
Financial planning is especially important as families budget end-of-life and retirement costs. In fact, transfers of wealth fail about 70% of the time, which means that the next generation involuntarily loses control over their assets, according to Forbes Personal Finance. If your aging mother has never had to handle personal finances, she’s likely not going to be able to handle the burden in her golden years; and often even children don’t have the financial information needed to adequately handle their parents’ estate and finances.
This is why it’s so crucial that families discuss aging and end-of-life affairs so that plans can be in place before the household’s financial planner is no longer able to do so. Andy Smith, Senior VP of Financial Planning at Financial Engines, host of the call-in radio program, Investing Sense, and A Place for Mom Advisory Board member, provides financial planning to families on a daily basis and was kind enough to offer his expert guidance:
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“It’s important to have the ‘tough conversation’ about finances and senior care sooner rather than later. On the radio program, we talk about wanting people to do this while everyone’s healthy and sharp. The longer you wait, the more difficult and expensive these talks may be.”
Women still live 5-10 year longer than men, according to studies at Boston University. Because of this, there are many 70, 80 and 90-year-old women who are left to make financial decisions without the necessary information and/or background. The grief of losing a spouse is one thing, but the new reality of handling finances can take quite a toll; especially if the widow suffers from dementia.
This is why it’s so crucial to discuss finances, partake in financial planning and appoint a durable power of attorney ahead of time. If Mom can’t handle the finances, it can be outlined who can step-up in case something happens. This person should have all the financial information handy to make sound financial decisions so that Mom doesn’t run out of money, and finances remain in good standing.
If you know it’s time to talk with your loved ones about finances but are having difficulty approaching the conversation, here are some pointers from Smith that can help you prepare:
1. Practice What You Want to Say
Just like with acting or reading, the more familiar you are with a subject, the more comfortable you will be and the more realistic things will sound. You don’t want to get too emotional, but you don’t want to be a robot, either.
2. Talk in a Comfortable Setting
Have a normal conversation and act like yourself. You don’t want to heighten already-high emotions.
3. Remember to Ask Your Parents About Their Finance Plans
It’s a great ice-breaker that provides a segue into deeper conversations:
The biggest mistake you can make is not having the conversation when everyone is still healthy — it will only make things more difficult and expensive down the road.
It really helps to work with a professional advisor who can become a quarterback, “someone who can take certain burdens off the family,” notes Smith. However, make sure the person on the other side of the table is not trying to push a product or just make a sale. A fiduciary is one way to go as they are unbiased experts.
In partnership with your advisor, there are a few steps your family will need to take to get your aging loved one’s affairs in order.
Getting organized for all the legal documents surrounding your loved one’s estate means you’ll need to gather a lot of information.
Here is some of the information you’ll need:
Keep information in a secure location that’s easily accessible (a safe or safety deposit box) and known to a few trusted family members. Don’t forget to share any keys or passwords needed to access the information. Letting people know now where things are prevents a scramble later when emotions could be heightened and decisions would have to be made quickly.
It is vital for your loved one, while mentally and physically able, to prepare key legal documents that will determine their end-of-life care, discuss their care wishes and protect their estate. Without these documents, families could accumulate significant costs while navigating the courts, and family relationships could become turbulent if disagreements arise regarding care for loved ones. Heartache and court costs could worsen more, too, if any loved ones suffer from cognitive impairment such as Alzheimer’s or dementia.
These key documents prepared correctly, however, become like gifts to your family:
While your loved one is of sound mind, it’s important to keep current all their necessary information and legal documents. Visits are great times to review your loved one’s wishes and estate plans to ensure everything remains in order. Smith comments,
“Personal preferences may change over the years, so regularly revisiting your loved one’s plans and documents — just in simple, relaxed conversations — helps keep their wishes clear.”
Finally, remember that if your family is communicating, has a plan and is aware of your loved one’s health or financial issues, things are in far better shape and everyone is ready to act quickly when needed.
If you’re put in the difficult situation of taking over family finances after a parent or spouse has died, here are a few tips to help you get organized:
1. Delay Big Money Decisions. Loss of a loved one can be challenging and adding to that the burden of getting affairs in order with financial decisions can be downright exhausting. It’s not an easy journey, but by taking one day at time to gather bills and financial information helps. Big money decisions, such as investments and cashing out accounts should wait until you have all the information and planning to back up these important decisions.
2. Get Organized. Start by setting up in-boxes, color-coded folders or binders with dividers to start sorting the influx of paperwork and bills. By keeping things simple and organized in a daily log or calendar with notes from important phone calls and meetings, you can start to connect the dots of the financial big picture.
3. Organize Bills and Create a Financial Triage. Once you have your bills sorted, create a triage of the most important. For example, mortgage, monthly household bills and insurance should take priority. If you put other bills in date order, you can organize payment, appropriately. It’s important to understand current cash flow and how much daily living is costing.
4. Don’t Tap into Retirement Accounts Too Early. You don’t want to have to pay unnecessary fees if you don’t have to for 401(k)s or IRA accounts. It’s important to get informed of any financial penalties from these sources of income before they are used.
5. Don’t Get ‘Help’ from the Wrong People. Salesmen or greedy relatives may start to come out of the woodworks. It’s important to stay calm and gather information before taking any investment advice or acting on ‘business opportunities’ as you could become a victim of elder abuse.
6. Review Social Security Benefits. Widows have two pots of money to choose from with Social Security benefits:
You can start with one pot and switch to the other later if it would result in a bigger benefit, but you have to figure out what makes the most sense for your family’s’ situation. The survivor benefit never gets larger, except for cost-of-living adjustments, but your own retirement benefits continue to grow 8% per year for every year you postpone collecting them beyond full retirement age. An expert financial advisor can help families figure out what makes the most sense for their unique situations.
7. Get Organized and Consult a Professional
As Smith noted above, it’s always good to get an expert and impartial third-party advisor who can help make objective decisions, without emotion attached. It is important that you find someone without objective or motive who can assist, such as a fiduciary.
Do you have financial advice to share? Has the loss of a loved one put your family in a difficult financial situation? Share your stories with us in the comments below.